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MERGERS & ACQUISITIONS • CAPITAL RAISES • FINANCIAL & STRATEGIC ADVISORY

1

HR TECH TRADING MULTIPLES MAJOR INDICES & EXCHANGE RATES

CHILDS TEAM RECENT HR TECH M&A

INTEREST RATE SUMMARY

RECENT HR TECH M&A

HR TECHNOLOGY MARKET UPDATE – SEPTEMBER 2016

Microsoft Announces Intent to Acquire LinkedIn

Deal value of $26.2 billion, or $196 per share, representsa 50% premium to LinkedIn’s price at announcement

Extends Microsoft’s efforts to become a ‘mobile first,cloud first’ company, according to CEO Satya Nadella.LinkedIn lost bidding battle and now trying to block.

Randstad Announces Intent to Acquire Monster

Deal value of $429 million, or $3.40 per share, representsa 23% premium to Monster’s price at announcement

Technology platform and mobility presence is viewed asan effort to combat’s Microsoft’s LinkedIn acquisition

One of several Internet high-flyers from early 1990sbeing acquired (Yahoo & AOL)

The annual HR Technology Conference is in Chicago this year from October4 – 7. Jim Childs, Tom Donahue, Scott Rhodes, and Kenny Silverman fromCHILDS Advisory Partners will be attending and hosting a cocktail receptionon October 5.

Capital Raise Collaborative Solutions is a

leading HR & finance consultancy with a focus on deploying Workday and other cloud-based software solutions

Buy-Side Advisory Barnett Associates is a

provider of unemployment tax compliance and claims administration solutions

Buy-Side Advisory Verify Job Systems (VJS) is a

leading automated employment and salary verification service provider

Recapitalization Advisory Peoplenet is a leading SaaS-

based provider time & attendance tracking solutions

Undisclosed Financial Sponsor

Enterprise Value

LTM Revenue LTM EBITDA

HR Tech 4.36x 23.0x

HR Outsourcing 3.02x 12.3x

% Change

1 Month 12 Month

Dow Jones 18,228.30 (0.8%) 12.4%

NYSE 10,665.34 (0.7%) 9.4%

NASDAQ 5,305.71 1.7% 15.0%

AMEX 2,406.35 2.0% 12.0%

S&P 500 2,159.93 (0.4%) 12.9%

Russell 2000 1,246.38 0.5% 13.7%

USD/Euro 0.89 (0.8%) (0.7%)

USD/Yen 101.28 (1.6%) (15.4%)

USD/Pound 0.77 0.5% 16.2%

Close as of

9/30/2016

Bps Change

1 Month 12 Month

U.S. Prime Rate 3.500% 0.00 Bps 25.00 Bps

U.S. Treasury - 10 Year 1.600% 0.00 Bps (46.00 Bps)

LIBOR - 3 month 0.854% 0.00 Bps 52.87 Bps

Fed Funds Overnight Rate 0.400% 0.00 Bps 33.00 Bps

As of

9/30/2016

2

CHILDS Advisory Partners

HR TECH CATEGORY REMAINS ACTIVE

-CAPITAL RAISE-

Online platform that enables businesses to manage their

external workforces

Current Round: $11

Total Raised: $15

Representative Investors:

‒ Valar Ventures

‒ Spring Partners

‒ Goldcrest Capital

-ACQUISITION-

Cloud-based payroll and human capital management software

Transaction Date: Q3 2016

Total EV: ND

Key Metrics:

‒ Target Rev: ND

‒ Target EBITDA: ND

‒ EV/Rev: NM

‒ EV/EBITDA: NM

-ACQUISITION-

Web-based application for employee benefits administration.

Acquisition by private equity backed platform company


Total EV: ND

Key Metrics:

‒ Target Rev: ND


‒ EV/Rev: NM

‒ EV/EBITDA: NM

-ACQUISITION-

Web-based recruitment platform

Transaction Date: Pending

Total EV: $26,191

Key Metrics:

‒ Target Rev: $3,214

‒ Target EBITDA: $266

‒ EV/Rev: 8.15x

‒ EV/EBITDA: 98.4x

Purchase Price as % of:

‒ All time high: 72.9%

‒ 52 week high: 75.9%

-ACQUISITION-

Web-based recruitment platform

Transaction Date: Pending

Total EV: $429

Key Metrics:

‒ Target Rev: $635

‒ Target EBITDA: ($82)

‒ EV/Rev: 0.68x

‒ EV/EBITDA: NM

Purchase Price as % of:

‒ All time high: 3.7%

‒ 52 week high: 41.3%

-ACQUISITION-

HR and payroll software solutions


Total EV: $39

Key Metrics:

‒ Target Rev: $18


‒ EV/Rev: 2.19x

‒ EV/EBITDA: NM

($ in millions)

3


Year Quarter Buyer TargetEnterprise Value ($M)

Pending KKR Calabrio ND

Pending Randstad Monster Worldwide $429

Pending Microsoft LinkedIn $26,190

Pending CareerBuilder WORKTERRA ND

PendingHockliffe Limited; Bond US(Symphony Technology Group)

Bond International staffing businesses $23

2016 Q3Benefit Express Services (LLR Partners)

Transcend Technologies (d.b.a. benefitsCONNECT) ND

2016 Q3 Peak Equity Valiant Solutions ND

2016 Q3 Tenzing Private Equity; Access Capital PartnersBond International HR and Payroll Softwarebusinesses

$39

2016 Q3 Equifax Barnett Associates ND

2016 Q3 Equifax Verify Job Systems (VJS) ND

2016 Q3 Undisclosed Financial Sponsor Peoplenet Corporation ND

2016 Q2 Workday Zaption ND

2016 Q2 WorkForce Software WorkPlace Systems ND

2016 Q2 Monster Jobr ND

2016 Q2 Tyler Technologies ExecuTime Software ND

2016 Q2 PeopleAdmin TeacherMatch ND

2016 Q2 The Ultimate Software Group Vestrics ND

2016 Q2 Wolters Kluwer Macmillan Learning, Learning Technology Platform ND

2016 Q2 Callidus Software ViewCentral $4

2016 Q2 PayScale MarketPay $55

2016 Q2 Frontline Technologies Centris Group ND

2016 Q1 Asure Software Mangrove Software $18

2016 Q1 HGCapital Raet ND

2016 Q1 Reward Gateway Yomp ND

2016 Q1 Barnes & Noble LoudCloud Systems ND

2016 Q1 Follett Corporation @ a Glance Software, Inc. (dba Classbook.com) ND

2016 Q1 Hodes QUEsocial ND

2016 Q1 New Harbor Capital Management Certica Solutions ND

RECENT HR TECHNOLOGY M&A TRANSACTIONS

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Year Quarter Investors TargetInvestment

($M)

2016 Q3 WestView Capital Partners Collaborative Solutions ND

2016 Q3 CIP Capital CARCO Group ND

2016 Q3 Gold Crest Capital; Spring Partners; Valar Ventures Lystable $15

2016 Q3 - Smart Employee Benefits $2

2016 Q3 Sterling Partners Panopto $43

2016 Q3 - Yello $3

2016 Q3BDC Venture Capital; Relay Ventures; GlobaliveCapital

Kira Talent $4

2016 Q3 Amplify Partners Subcurrent $1

2016 Q3 Cambridge Innovations ComplyGlobal ND

2016 Q3 - Purple Squirrel $3

2016 Q3 Slack Technologies Wade & Wendy ND

2016 Q3 - Zuman $4

2016 Q3 WannaBiz; Digital Future; Lighter Capital Rallyware $1

2016 Q3 - WorkBright $0

2016 Q3 - Paycor $45

2016 Q2 - Reflik $1

2016 Q2 Insight Venture Partners SmartRecruiters $30

2016 Q2Jerusalem Venture Partners; Verint SystemslShaked Ventures, others

Biz-Effective $7

2016 Q2 - RiverMeadow Software $3

2016 Q2 New Brunswick Innovation Foundation Qimple $1

2016 Q2 - TalentSky $5

2016 Q2 Baird Venture Partners Hireology $12

2016 Q2 Sapphire Ventures; Tola Capital Convercent $11

2016 Q2 Battery Ventures; Shasta Ventures Entelo $12

2016 Q23TS Capital Partners; Rittenhouse Ventures; Starvest Partners

Take The Interview $6

2016 Q2 Austin Ventures Bloomfire $13

RECENT HR TECHNOLOGY CAPITAL RAISES

5

EV/EBITDA

M&A ACTIVITY AND TRENDS


EV/Revenue

MIDDLE MARKET M&A VALUATIONS

Sources: Capital IQ, Gartner, Forrester, CHILDS proprietary database* through September 2016

U.S. MIDDLE MARKET SOFTWARE M&A ACTIVITY – QUARTERLY TRENDS

Valuations are holding steady in M&A deals, but dealvolume continues to decline from last year.

The slowdown in the U.S. M&A market has persistedthrough September. The middle market deal volumeYTD for software companies declined by 219 deals, or14.5%, to 1,293, versus 1,512 deals through the sameperiod in 2015. We define middle market as deals lessthan $1 billion in enterprise value, including deals wherevalue was undisclosed.

M&A valuations for all U.S. middle market deals areconsistent with recent historical trends. The averageEnterprise Value/Revenue multiple has stayed relativelyconsistent at 1.49x, and the average EnterpriseValue/EBITDA multiple has declined by 5.7% from 8.7xto 8.2x.

Macroeconomic and political uncertainty arecontributing to a slowdown in short term M&A activity,but the continuing pressure to innovate and bundlemore services for customers will drive mergers andacquisitions longer term.

Strategic and financial buyers remain active but arescrutinizing targets to avoid over paying as bull marketgets long in the tooth.

An increasingly large share of acquisition activity byprivate equity firms are “add-on” deals for existingportfolio companies (approximately 70% for technologydeals).

Strategic buyers continue to look for M&A to supplementsluggish organic revenue growth and have strongbalance sheets and access to low cost financing.

1.17x1.24x

1.37x1.46x 1.49x

0.00x

0.40x

0.80x

1.20x

1.60x

2012 2013 2014 2015 2016 YTD*

7.8x

8.1x

8.6x8.7x

8.2x

7.0x

7.5x

8.0x

8.5x

9.0x

2012 2013 2014 2015 2016 YTD*

304 312 335

304 321

384 361 378

402 376 379 380 373 388

321

73 76 78

97 97

106

98 96

106

104 82 99 80 57

23

12 11

10 26 23

16

17 19

15

14 18

20

16 15

10

4 2

2 4 4

6

6 7

4

4 8

7

2 5

3

200

250

300

350

400

450

500

550

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16

Dea

l Vo

lum

e

Undisclosed Less than $100M $100M - $499M $500M - $1,000M

6


HR TECHNOLOGY PUBLIC TRADING STATISTICS

Sources: Capital IQ, CHILDS proprietary database* Denotes figure excluded from mean calculation

HR TECHNOLOGY

HRO (HUMAN RESOURCES OUTSOURCING)

(USD in millions, except for stock price)

(USD in millions, except for stock price)

DATES EVENT LOCATION

Sep 21 – Sep 22 Collaboration in the Gig Economy Las Vegas, NV

Sep 28 – Sep 30 EBN Benefits Forum & Expo Nashville, TN

Oct 4 – Oct 7 HR Technology Conference & Exposition Chicago, IL

Oct 25 – Oct 27 SHRM Diversity & Inclusion Conference Austin, TX

Oct 25 – Oct 27 Staffing World San Diego, CA

Nov 14 – Nov 16 Recruiting Trends Conference Austin, TX

Nov 15 – Nov 15 Talent Acquisition Tech Conference Austin, TX

RECENT HCM CONFERENCES [1]

[1]: Green font represents planned attendance by CHILDS Advisory Partners

Market Data Operating Statistics EV as a Multiple of: Growth

Stock Price LTM LTM CY2017

Company Name 9/30/2016 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDAAverage

LinkedIn Corporation $191.12 $258.39 74.0% $25,749.4 $23,615.9 $3,434.9 $395.6 11.5% 6.88x 59.7x * 5.24x 18.2x 40.3%

Workday, Inc. 91.69 92.46 99.2% 18,338.0 16,790.9 1,351.8 (208.9) (15.5%) 12.42x * NM 8.23x * 73.4x * 56.4%

The Ultimate Software Group, Inc. 204.39 224.07 91.2% 5,914.6 5,826.3 699.7 66.3 9.5% 8.33x * 87.8x * 6.11x 24.5x 23.6%

Paycom Software, Inc. 50.13 52.93 94.7% 2,999.1 2,947.5 284.5 67.1 23.6% 10.36x * 43.9x * 7.00x * 27.1x 44.5%

Cornerstone OnDemand, Inc. 45.95 47.75 96.2% 2,570.1 2,537.2 389.5 (54.1) (13.9%) 6.51x NM 4.86x 47.4x * 37.7%

Paylocity Holding Corporation 44.46 49.65 89.5% 2,274.5 2,188.0 230.7 4.9 2.1% 9.48x * NM * 5.85x 42.6x * 44.0%

WageWorks, Inc. 60.91 65.43 93.1% 2,229.1 1,739.1 341.0 66.4 19.5% 5.10x 26.2x 4.33x * 13.6x 40.5%

Benefitfocus, Inc. 39.92 44.98 88.8% 1,183.7 1,191.0 212.4 (36.3) (17.1%) 5.61x NM 4.06x 121.8x * 32.5%

Callidus Software Inc. 18.35 21.64 84.8% 1,142.5 1,048.5 189.9 (0.2) (0.1%) 5.52x NM 4.32x 31.5x 23.6%

HealthStream, Inc. 27.60 28.16 98.0% 876.0 737.2 218.6 24.5 11.2% 3.37x 30.2x 2.82x 16.0x 23.6%

DHI Group, Inc. 7.89 10.48 75.3% 395.2 463.3 246.2 56.0 22.8% 1.88x 8.3x 1.93x 6.6x 6.6%

Halogen Software Inc. 7.76 7.96 97.4% 166.7 132.0 69.4 0.3 0.5% 1.92x NM 1.61x 21.9x 17.3%

Asure Software, Inc. 6.43 6.69 96.1% 41.9 72.6 29.8 2.7 8.9% 2.44x 27.4x 1.77x 8.7x 7.7%

Mean 90.6% $592.2 $29.6 4.8% 4.36x 23.0x 3.86x 18.7x 30.6%

Median 93.1% $246.2 $4.9 8.9% 5.10x 26.8x 4.19x 18.2x 32.5%

3 Year

Rev CAGR

52 Week

High

% of 52

Week HighMarket Cap.

Enterprise

Value

Market Data Operating Statistics EV as a Multiple of:

Stock Price LTM LTM CY2017

Company Name 9/30/2016 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDAAverage

Automatic Data Processing, Inc. $88.20 $96.00 91.9% $40,075.9 $38,869.0 $11,667.8 $2,536.7 21.7% 3.33x 15.3x 2.89x 13.2x 7.3%

Paychex, Inc. 57.87 61.87 93.5% 20,931.6 20,485.2 3,014.4 1,291.3 42.8% 6.80x 15.9x 6.02x 14.0x 8.5%

Willis Towers Watson Public Limited Company132.77 133.40 99.5% 18,329.0 21,379.0 5,924.0 1,217.0 20.5% 3.61x 17.6x 2.55x 11.1x 18.6%

Capita plc 8.72 17.01 51.3% 5,805.1 8,586.1 6,618.0 1,008.6 15.2% 1.32x 8.7x 1.32x 8.5x 11.8%

51job Inc. 33.38 35.49 94.1% 1,985.4 1,358.1 327.0 95.8 29.3% 4.15x 14.2x 3.37x 9.9x 13.4%

CEB Inc. 54.47 78.21 69.6% 1,754.2 2,492.5 940.7 203.4 21.6% 2.65x 12.3x 2.45x 9.4x 7.7%

Insperity, Inc. 72.64 82.18 88.4% 1,554.2 1,385.1 2,786.0 112.8 4.1% 0.50x * 12.3x 0.42x * 8.2x 8.1%

TriNet Group, Inc. 21.63 22.97 94.2% 1,519.5 1,825.2 2,872.5 131.0 4.6% 0.64x * 13.9x 0.52x * 9.0x 27.2%

CBIZ, Inc. 11.19 11.82 94.7% 587.5 815.6 772.8 90.3 11.7% 1.06x 9.0x 0.97x 8.1x 5.5%

Barrett Business Services Inc. 49.61 53.00 93.6% 359.4 371.2 786.9 34.5 4.4% 0.47x * 10.8x 0.00x * 0.0x * 19.2%

Monster Worldwide, Inc. 3.61 7.74 46.6% 321.5 401.5 635.0 75.1 11.8% 0.63x * 5.3x 0.65x 5.1x (9.1%)

Connecture, Inc. 1.88 6.26 30.0% 42.0 108.3 88.1 (0.6) (0.6%) 1.23x NM * 1.08x 12.0x 0.0%

Mean 79.0% $3,036.1 $566.3 15.6% 3.02x 12.3x 2.37x 9.9x 9.9%

Median 92.7% $1,863.4 $121.9 13.5% 2.99x 12.3x 2.45x 9.4x 8.3%

52 Week

High

% of 52

Week HighMarket Cap.

Enterprise

Value

3 Year

Rev CAGR

7


STOCK MARKET FUNDAMENTALS

HR Tech: LNKD, WDAY, ULTI, PAYC, WAGE, PCTY, CSOD, BNFT, CALD, HSTM, DHX, HGN, ASURHR Outsourcing: ADP, BBSI, CPI, NSP, PAYX, XCH, JOBS, TNET, MWW, CNXR, CEB, WLTW, CBZ

HR SECTOR INDICES VS. S&P 500

VALUATION TREND DATA (EV/LTM REVENUE)

(50.0%)

(40.0%)

(30.0%)

(20.0%)

(10.0%)

0.0%

10.0%

20.0%

30.0%

40.0%

HR Tech HRO (Human Resources Outsourcing) S&P 500 Index

LinkedIn has over 40% weighting in index dragging down performance in 2016

28.3%

(1.6%)

14.6%

1 mo. 12 mos. 3 yrs

S&P 500 (0.5%) 11.1% 28.3%

HR Tech (0.6%) 14.1% (1.6%)

HRO (6.0%) 3.2% 14.6%

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

5.0x

HR Tech HRO (Human Resources Outsourcing)

3.02x

4.36x

1 mo. 12 mos. 3 yrs

HR Tech (0.3%) 31.1% 33.1%

HRO 18.0% 5.0% (17.2%)

8


FIRM OVERVIEW

KEY FACTS

2015 & 2013 M&A ADVISOR’S U.S.

BOUTIQUE INVESTMENT BANK

OF THE YEAR FINALIST

2013 M&A ADVISOR’SSTRATEGIC DEAL OF THE

YEAR WINNER

2014 M&A ADVISOR’S IT PROFESSIONAL SERVICES

TRANSACTION OF THE YEAR

FINALIST

RANKED #1 BY

451 GROUP FOR IT SERVICES

TRANSACTIONS IN 2015

ATLANTA’S FASTEST

GROWING INVESTMENT BANK

2014 M&A ADVISOR’SCROSS-BORDER TRANSACTION

OF THE YEAR FINALIST

39 professionals across four offices in U.S. with headquarters in Atlanta

66 transactions completed in last 3 years

60% Sponsor / 40% Strategic buyers

Leadership in Middle Market M&A transactions (<$500M)

‒ #1 in HCM / Staffing

‒ #1 in Healthcare IT Consulting

‒ #1 in IT Services

Humble. Hungry. Smart. Team.

SOFTWARE SECTOR FOCUS

RECENT ACCOLADES

MERGERS & ACQUISITIONS

CAPITAL RAISESFINANCIAL &

STRATEGIC ADVISORY

CHILDS ADVISORY PARTNERS’ SERVICES

Recruiting

Onboarding

Talent

Workforce

Analytics

Compliance

Human Resources

Healthcare

Marketing

Vertical SaaS

BI & Analytics

Product/Supply-Chain Management

SOFTWARE HR TECH

9


TEAM’S EXTENSIVE EXPERIENCE IN HR TECHNOLOGY

Recapitalization Advisory WFM consulting services and analytics software to the retail, healthcare, manufacturing

and public sector industries

Sell-Side Advisory Research and consulting services focused on assessment and development of leaders

Buy-Side Advisory Job application evaluation and suitability software solutions

Sell-Side Advisory Leading provider of Workday consulting services and the first acquisition in the

ecosystem

Recapitalization Advisory End-to-end talent management software solutions exclusively for healthcare organizations

Sell-Side Advisory On-demand workforce optimization solutions that monitor transitions, analyze metrics,

and automate deployment processes

People Business Network (PBN)

Recapitalization Advisory SaaS-based provider of workforce management solutions with a focus on time &

attendance

Sell-Side Advisory Provider of integrated talent acquisition solutions such as MSP, VMS, payroll, and

recruitment process outsourcing

Buy-Side Advisory Leading automated employment and salary verification service provider

Sell-Side Advisory Integrated operations management solutions to retail organizations

Buy-Side Advisory Workforce planning, scheduling, and management solutions

Buy-Side Advisory Provider of unemployment tax compliance, employment verification, unemployment

claims administration, and international employment tax services

Buy-Side Advisory SAP and SuccessFactors partner in North America specializing in HCM consulting services

Sell-Side Advisory Oracle/PeopleSoft consulting services to the healthcare and state/local industries

Sell-Side Advisory Provider of pre-hire and post-hire talent assessments

Undisclosed Financial Sponsor

Capital Raise Collaborative Solutions is a leading HR & finance consultancy with a focus on deploying

Workday and other cloud-based software solutions

10


CHILDS’ HR TECHNOLOGY TEAM

CHILDS Advisory Partners | 3438 Peachtree Road, Suite 1400 Phipps Tower | Atlanta, GA 30326 | ph: 404.751.3000 | www.childsadvisorypartners.com

Scott RhodesManaging Director

[email protected]

Justin BentleyVice President404.751.3048

[email protected]

Steve CarrVice President404.751.3013

[email protected]

Tom DonahueManaging Director

[email protected]

CHILDS OFFERS THE SENIOR LEVEL ATTENTION AND ADVISORY FOCUS OF A BOUTIQUE FIRM

COUPLED WITH BANKERS WITH BULGE BRACKET EXPERIENCE

\

Former Corporate Development executive for two S&P 500 companies, Equifax and Waste Management

CEO of private equity backed business called Bagster sold to strategic

12 years of investment banking experience with Robinson Humphrey (Citigroup) and Bank of America with over 80 M&A and capital markets transactions

MBA from Kellogg School at Northwestern University (Beta Gamma Sigma) and BA from UNC Chapel Hill (Phi Beta Kappa)

Co-founder of Bulger Capital Partners

Co-head of East Coast Services and Software for Needham & Company

18 years of investment banking experience executing M&A transactions and raising capital

MBA from F.W. Olin School of Business at Babson College and a BA from Hobart College

7 years of investment banking experience with Morgan Stanley and KPMG

Executed 15 M&A and capital markets transactions (over $15 billion in value)

MBA from Darden School of Business at the University of Virginia and undergraduate from the University of Virginia

Current and past clients include companies such as Nexus, Bear Data, Aggressor and Utopia

Former investment banker at SunTrust Robinson Humphrey

Graduated cum laude from Washington & Lee University

Former M&A investment banker at SunTrust Robinson Humphrey

Prior to joining SunTrust, Mr. Silverman was an analyst in the technology group at Canaan Partners, a venture capital firm based in California

M.A.c.c. and B.B.A. from the University of Georgia

CPA earned in 2013

Scott RhodesManaging Director

404.751.3021

Tom DonahueManaging Director

617.290.5433

Justin BentleyVice President

404.751.3048

Steve CarrVice President

404.751.3013

Kenny SilvermanAssociate

404.751.3041

Kenny SilvermanAssociate

[email protected]

close as of % change 9/30/2016 - bowstring advisors · technology platform and mobility presence is...

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